Issuer officials who said Treasury's final issue price rules are a vast improvement over earlier proposals nevertheless raised concern that they might discourage competitive sales of bonds or create problems for issuers if underwriters run afoul of the rules.

Ex-SEC Head Urges Focus On Munis

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WASHINGTON - Former Securities and Exchange Commission chairman Arthur Levitt is urging Mary Schapiro, President Obama's nominee to head the SEC, to bring municipal securities back to the fore of the agency's agenda as part of her plans for reform.

Levitt headed the SEC from 1993 to 2001 and made reform on the muni market one of his top concerns. He said last week that Schapiro, if confirmed by the Senate, should beef up the staff of the commission's Office of Municipal Securities and recast it as a stand-alone department that reports directly to her, similar to the way it operated during the Clinton administration.

"They have a relatively inactive division of municipal finance today," Levitt said in a telephone interview last week. "They've got to beef up that division and hire people who understand municipal finance and go after a lot of wrongdoing that's going on in the market."

A higher profile for the SEC's muni shop is warranted because "the municipal market is opaque [and] under-regulated," Levitt said. "A large number of individual investors who have access to this market are being disadvantaged by relatively ineffectual information." He added that Schapiro ought to aggressively bring enforcement actions against pay-to-play violators while also working to bring unregulated financial advisers and other market participants under federal oversight.

Levitt said that he has already discussed his ideas for the office with Schapiro, but declined to say how she received them. Schapiro did not address municipal issues at a Senate Banking Committee confirmation hearing Thursday and took no questions from reporters afterward. Calls and e-mails to the Obama transition team seeking comment on the issue were not returned.

Levitt announced the creation of the stand-alone Office of Municipal Securities in March 1995 in the midst of a campaign to reform the muni market by increasing disclosure and price transparency and by cracking down on conflicts of interest and other abuses.

But in 2000, after the departure of its director, Paul Maco, who is now a partner at Vinson and Elkins LLC, the office was merged into the SEC's division of market regulation, now the division of trading and markets. Commission officials said at the time that the merger would build on the synergies between the work of the office and the rest of the division.

Since then, the staff of the office has been cut from a one-time high of seven people to two, one of whom is its current chief, Martha Mahan Haines.

Levitt said he does not know how large the municipal office should become, but he stressed that boosting its resources should be high on the agenda.